Becoming your own boss and starting your own business have many challenges and aspects to consider.
Buying an existing business
If you aren’t the type of person to go out and build an empire from scratch, but would like to be in your own venture, consider other opportunities like buying into an existing business or buying a franchise. It’s important to examine the pros and cons of each one so you can find a venture that suits your lifestyle and objectives.
An easy way to go into business is to buy shares in someone else’s enterprise. This can be a great springboard into entrepreneurship, but you need to navigate a litany of issues. Firstly, you need to determine the worth of the company: this is best done by a business consultant or an accountant. Each year the business will be required to send in a set of financials to the SA Revenue Service. Full credit checks should be run on the business and existing partners as well.
Partnership agreements should be drawn up, covering what you’ll get for your investment (percentage shareholding), what your duties will be and an exit strategy, which documents the procedure that would need to be followed if you wanted to sell your shares in the business.
Buying a franchise gives you the opportunity to purchase a ready-made business. Usually they’ll have a national infrastructure, an established brand and start-up support.
Franchises don’t come cheap – they can start at anywhere from R10 000-R1 million
and more. Many organisations let you pay part of the franchise costs out of the profits, but they still require a hefty cash deposit. Banks are usually more willing to lend money for the purchase of a franchise, provided that you have a good track record and experience in the business you’re purchasing.
Many would-be franchise owners go into the deal blindly and get wooed by the impressive sales figures of existing units/products. It’s vital to get an independent audit of the franchise if you’re buying it as a going concern. This will help you establish the real value of the business. If it’s a brand-new franchise, any good retailer will tell you that location is everything, so you need to compare apples with apples. While it may be easy for a person in Sandton, Johannesburg to turn over R1 million a month, you may struggle to see R10 000 for your location in an obscure or less affluent area.
Not all franchises are equal and there are some unscrupulous operators out there who are simply in the business of collecting franchise fees. So before you sign on the dotted line, ask some existing franchise-holders whether the franchisor’s keeping up their end of the bargain.